FXML’s Forex Signals Analysis of September 1-7, 2014
The Market
August is over and we're already in September, so we find ourselves with financial markets in full trading mode. Well, at least that's what I was expecting, but this week has already disappointed and caused me to abandon that expectation. Monday was a bank holiday in the US which definitely played its part in the markets and caused Monday to be especially numb.
This numbness continued on Tuesday and Wednesday in EUR/USD and USD/CHF with a 20-30 pip range. Only GBP made a strong move down to 1.6440 which has acted as support/resistance before and acted as such until Thursday, that's history now. But the move was pretty fast so we couldn't issue as many signals as we would have liked, just one at the top around 1.6640. This unwillingness of the market to move was a reaction to the anticipation of the ECB rate decision and ECB chairman Draghi's press conference on Thursday, this made everyone cautious in trading the Euro and its pegged minion CHF.
Signals
Therefore, the number of signals was relatively low on Monday and Tuesday with only five of them being issued. We picked up the pace on Wednesday and Thursday to issue 11 signals on both days. There were opportunities to issue more signals on Thursday, but the 200 pip decline on EUR/USD happened extremely fast and we only managed to get one short signal starting from the top. We have another 4 signals open, which we opened this week, so the total for the week, as of Friday noon, stands slightly below our weekly average at 20. If today progresses well later on and we have some nice action across the board then we might issue more signals and reach the weekly average.
Despite the fact that we've been low in the number of signals, we've been doing pretty well in the number of pips earned this week. Last week we made around 175 pips and we kept that good performance going this week as well. As I write, our signals have made 145 pips in total and if all goes smooth we might increase the profits even more this afternoon.
Just like last week, we chose to stick to the majors, with 16 signals in EUR/USD, GBP/USD and USD/JPY accounting for more than 75% of the signals. We had only 2 losses this week, one in USD/JPY and the other was a buy signal for EUR/USD which was a mistake because it was meant to be a sell, but I hit the buy button by mistake, so my apologies for that. If that mistake had been avoided our profits would have been around 200 pips with only 1 losing signal, but as they say the past is gone the future is now.
Movements
We had some important data this week but didn’t see much effect in the market. On Monday we had the Manufacturing PMI from UK coming lower than expected and the revisions were lower too but it didn't affect the pound. On Tuesday there was the RBA Rate Statement and Cash Rate from Australia remaining where it was at 2.50%, which pushed the AUD/USD lower.
The good momentum in the US economy continued this week, with the data beating expectations same as August. On Tuesday there was the Manufacturing PMI, on Thursday the Trade Balance, Unemployment Claims and the Non-Manufacturing PMI all above the consensus. This kept the USD bid but the real mover was the ECB Rate Decision and Draghi's press conference. As we mentioned above, it was quiet the whole week up till Thursday, so it felt like the calm that comes before the storm. Then the ECB caught the market by surprise by cutting the REFI Rate to 0.05% from 0.15% and Euro dropped more than 100 pips in seconds across all pairs related. It calmed down for about 30 minutes till the Conference started and it dropped another 100 pips in minutes against the USD.
Like we said, EUR/USD was really numb until Thursday at around noon GMT. It was trading in a 30 pip range from 1.3120 to 1.3150, so that made it difficult to place proper trades. Instead we scalped this pair, mostly selling at the top, since the overall trend was down.
We issued 7 signals, all of which were intended to be sell signals, but as we mentioned above one of them was a buy signal by mistake. All the sell signals hit profit target and the one buy closed in loss. Even with that mistake we made 60 pips profit in this pair. Then on Thursday as the 50 MA was catching up with the price in the H4 chart the ECB hurricane appeared and we see the pair falling more than 200 pips.
EUR/USD 1 hour chart – EUR/USD was trading in a range all week, until Thursday when it suddenly dropped more than 200 pips.
EUR/USD 4 hour chart – 50 MA caught up with the price and Stochs were overbought right before the 200 pip drop on Thursday.
GBP/USD was on the back foot this week as well, just like the Euro, falling about 350 pips from top to bottom. On the daily chart, the 100 smooth MA has been support before and it has turned into resistance. On the hourly chart we can see the price falling about 150 pips during Tuesday for no reason other than the technicals.
Then the 20 exponential MA provided resistance and we took a few shorts, since we know that in strong trends the smaller moving averages provide support/resistance until the bigger ones catch up. We issued 3 sell signals on this pair all hitting profit with chances for more signals coming up, but we were a bit too cautious, which sometimes limits your potential.
GBP/USD 1 hour chart – GBP/USD was on a downtrend the whole week, falling 350 pips in total.
GBP/USD daily chart – the 100 smooth MA has been support before and it has now turned into resistance.
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